Which is better: Bitcoin or Ethereum? BTC vs ETH, The Match!





Bitcoin and Ethereum are the Coca-Cola and Pepsi of the space crypto-currencies. As the first and second biggest names in the market, they are often compared to each other and on the surface they share many similarities.

However, from their premise to price differences, the two concepts are very different. Here’s a look at their comparison.

Before you begin…

Bitcoin and Ethereum are systems, while bitcoin (lowercase b) and Ether are the cryptocurrencies used by these systems. See also: “Ethereum price will hit bottom soon,” says the analyst who predicted the 2018 bear market.. When we compare the two ecosystems, we need to be clear whether we are comparing the technology, the assets that the technology produces, or both.

In this article, we will refer to systems by name and currencies by their ticker symbol. For bitcoin, it’s BTC. For Ether, it’s ETH.

Comparison between Bitcoin and Ethereum

Bitcoin and Ethereum are fundamentally different as the former was designed to enable decentralized finance while the latter was designed to enable applications and contracts as well. Read also: War in Ukraine & SWIFT Russia: the cryptocurrency market is preparing for another earthquake!.

Although Ethereum allows payments to be made using its internal cryptocurrency ETH, its scope is much broader than that of Bitcoin – by design.

Both systems use blockchain technology to validate and record transactions, but an upcoming change in the way Ethereum operates will mean that the way they do it is different, with consequences for speed, durability and reliability. accessibility.

The difference is what is called a “consensus mechanism”.

What is a consensus mechanism?

A consensus mechanism is a computer algorithm that makes a blockchain viable. On the same subject : Solana Price Prediction: Is SOL Still a Good Investment Today?. It does this by solving the problem known as “double spending”.

A $10 bill, once spent, is no longer yours, so you cannot spend it again. A BTC is a string of computer code, and can be copied endlessly. In theory, this means you can get as rich as you want by simply making copies of your BTC and spending it over and over again.

However, when you send BTC to someone, your copy is destroyed and a new version is created in the recipient’s account.

All of this is recorded on a distributed ledger, visible to the world. Since anyone can see on their copy of the ledger that you’ve spent your BTC, you can’t try to spend a copied version of it – the consensus of ledger holders would be that you’re trying to get a quick shot. .

Changing one transaction is hard enough, but all subsequent transactions would need to be changed as well, since each of them references its predecessors.

This would require an incredible amount of computational power and effort, not to mention that you would need to control 51% of the distributed ledgers on the network to gain the consensus needed to burn your fake transaction history onto the blockchain and take your freshly mined crypto. in reward.

Bitcoin and Ethereum use different consensus mechanisms.

That of bitcoin is called proof-of-work, while Ethereum is moving towards a proof-of-stake consensus mechanism.

proof of work

This consensus mechanism asks participants to perform complex calculations for the chance to become the user who will validate a set of transactions and add them to the blockchain, which will allow them to earn a certain amount of cryptocurrency.

The “work” is to guess, as accurately as possible, a unique 64-character alphanumeric string.

There are trillions of possible combinations for these strings, so those with the most powerful hardware can make the most guesses per second within the 10-minute window of opportunity, and have the best chance of being the selected validator.

Getting a tampered copy of the ledger validated and added to the block would require controlling at least 51% (a consensus) of a network’s computing power, which would be astronomical. This is how the consensus method prevents fraud.

This work used to be done by home hobbyists, but the processing power needed increases over time, so the ‘mining’ process is now reserved for specialist companies and organizations, i.e. those who can afford to buy the hardware and power to run it.

Proof-of-work systems such as bitcoin have come under a lot of criticism due to the amount of energy expended by the computer hardware used. Bitcoin currently uses 19 terawatt hours (TWh) of electricity per year. This is slightly less than the amount used by the whole of Norway.

Proof of Stake

This consensus mechanism requires participants to stake their own money for the chance to validate transactions and add a block to a blockchain, rather than performing complex calculations.

The more crypto a person stakes, the more likely they are to be chosen to complete a block of transactions on a blockchain and earn a set amount of crypto. The system also discourages bad actors with financial penalties.

Proof of stake favors people with more money, but protects against people who add fraudulent records to the blockchain, as they must own at least 51% of the money in the network to control a consensus.

Not requiring powerful hardware, Proof of Stake is considered a greener consensus mechanism than Proof of Work.

Decentralized payments vs. decentralized software

Bitcoin was developed solely to facilitate decentralized payments, i.e. to allow people to send and receive payments without an intermediary such as a bank. Ethereum, on the other hand, was designed to do more than just send and receive ETH.

Using blockchain, which provides an immutable record of transactions, Ethereum was designed to facilitate decentralized software such as smart contracts and distributed applications (dApps).

A smart contract is a digital agreement between two or more parties that self-executes when certain conditions are met.

For example, account A will release asset X as soon as it receives asset Y from account B. This system could be used to speed up real estate sales and transfer of ownership and reduce the risk of fraud.

A dApp is an application that is not controlled by a central authority. Twitter is an example of a centralized application, with users relying on it as an intermediary to send and receive messages. As such, users abide by the rules it enforces and the algorithm it uses to control content.

A dApp is distributed on a blockchain, with users able to send and receive data directly without the need for an intermediary. Peepeth is a Twitter-like dApp. She claims that as an app, it doesn’t maximize ad revenue, a problem she says users of centralized apps suffer from.

So, while it can be said that Bitcoin is bigger, but Ethereum is faster, the two are not strictly in competition with each other because they are designed.we to do different things. BTC and ETH, on the other hand, are directly comparable.

Price volatility

BTC has certainly been more valuable than ETH, peaking at around $68,000 in November 2021 (before crashing below $20,000 in May 2022). ETH, meanwhile, peaked at around US$4,800 in November 2021…

Despite the stark difference in their values, the values ​​of the two cryptocurrencies have historically shown a strong positive correlation to each other, trending between 0.7 and 0.8 for most of this time. (1.0 representing the strongest possible correlation), according to data from coinmetrics.io.

Either way, and as with all cryptocurrencies, both BTC and ETH are volatile. Prices are unpredictable and prone to crashes, as we saw in May this year when the market capitalization of crypto assets fell to around US$900 billion from US$3 trillion.

The cryptocurrency market is unregulated in Australia, although consumer organizations such as CHOICE are pushing for people who are victims of scams and huge losses to be better protected. For now, the Australian Securities and Investments Commission (ASIC), through its Moneysmart website, advises cryptocurrency investors to be extremely careful when dealing with this volatile asset.

💎 Open an account for free to Invest in crypto!

CoinHouse allows you to easily invest in crypto-assets. Creating an account is free and takes just a few simple steps.

📈 Trade cryptos online in just a few clicks!

BitPanda allows you to trade crypto easily online. Creating an account is fast, free and very simple.

Be vigilant and consult your financial adviser before making any investment decision. Mirror-Mag cannot be held responsible in the event of bad investments. Before using any third-party service, you should do your own research.

ThomasE.
The latest articles by Thomas E. (see everything)